Exam 10: Partnerships: Formation, Operation, and Changes in Membership

In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following questions is independent of the others. -Refer to the information provided above. David directly purchases a one-fifth interest by paying Allen $34,000 and Daniel $10,000. The land account is increased before David is admitted. What are the capital balances of Allen and Daniel after David is admitted into the partnership?

The DEF partnership reported net income of $130,000 for the year ended December 31, 2008. According to the partnership agreement, partnership profits and losses are to be distributed as follows: How should partnership net income for 2008 be allocated to D, E, and F?

A joint venture may be organized as a: I. Partnership. II. Corporation. III. Undivided interest.

When a new partner is admitted into a partnership and the old partners' goodwill is recognized, the goodwill is allocated to: I. all the partners in their profit-and-loss-sharing ratio. II. the old partners in their profit and loss sharing ratio.

In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following questions is independent of the others. -Refer to the information provided above. What amount will David have to invest to give him one-fifth percent interest in the capital of the partnership if no goodwill or bonus is recorded?

Net income for Levin-Tom partnership for 2009 was $125,000. Levin and Tom have agreed to distribute partnership net income according to the following plan: Additional Information for 2009 follows: 1. Levin began the year with a capital balance of $75,000. 2. Tom began the year with a capital balance of $100,000. 3. On March 1, Levin invested an additional $25,000 into the partnership. 4. On October 1, Tom invested an additional $20,000 into the partnership. 5. Throughout 2009, each partner withdrew $200 per week in anticipation of partnership net income. The partners agreed that these withdrawals are not to be included in the computation of average capital balances for purposes of income distributions. Required: a. Prepare a schedule that discloses the distribution of partnership net income for 2009. Show supporting computations in good form. b. Prepare the statement of partners' capital at December 31, 2009. c. How would your answer to part a change if all of the provisions of the income distribution plan were the same except that the salaries were $45,000 to Levin and $60,000 to Jack?

Apple and Betty are planning on beginning a new business. They plan on forming a partnership. Apple will contribute $300,000 and will not be working. Betty will be working full time. They plan on splitting profits equally. They approach you, as an accounting major, to confirm their thoughts. What do you recommend?

In the RST partnership, Ron's capital is $80,000, Stella's is $75,000, and Tiffany's is $50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the partnership. Each of the following questions is independent of the others. -Refer to the above information. Tiffany is paid $60,000, and no goodwill is recorded. In the journal entry to record Tiffany's withdrawal:

Which of the following statements best describes limited partnerships?

-Refer to the above information. Which statement below is correct if a new partner purchases an interest in capital directly from the old partners?

When a new partner is admitted into a partnership and the new partner receives a capital credit less than the tangible assets contributed, which of the following explains the difference? I. The new partner's goodwill has been recognized. II. The old partners received a bonus from the new partner.

In the RST partnership, Ron's capital is $80,000, Stella's is $75,000, and Tiffany's is $50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the partnership. Each of the following questions is independent of the others. -Refer to the above information. Tiffany is paid $56,000, and all implied goodwill is recorded. What is the total amount of goodwill recorded?

Jones and Smith formed a partnership with each partner contributing the following items: Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith partnership. -Refer to the above information. What is the balance in each partner's capital account for financial accounting purposes?

When a partner retires from a partnership and the retiring partner is paid more than the capital balance in her account, which of the following explains the difference? I. The retiring partner is receiving a bonus from the other partners. II. The retiring partner's goodwill is being recognized.

When a partnership is formed, noncash assets contributed by partners should be recorded: I. at their respective book values for income tax purposes. II. at their respective fair values for financial accounting purposes.

In the JAW partnership, Jane's capital is $100,000, Anne's is $80,000, and William's is $75,000. They share income in a 3:2:1 ratio, respectively. William is retiring from the partnership. Required Prepare journal entries to record William's withdrawal according to each of the following independent assumptions: a. William is paid $80,000, and no goodwill is recorded. b. William is paid $85,000, and only his share of the goodwill is recorded. c. William is paid $78,000, and all implied goodwill is recorded.

In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following questions is independent of the others. -Refer to the information provided above. Allen and Daniel agree that some of the inventory is obsolete. The inventory account is decreased before David is admitted. David invests $40,000 for a one-fifth interest. What are the capital balances of Allen and Daniel after David is admitted into the partnership?

A partner's tax basis in a partnership is comprised of which of the following items? I. The partner's tax basis of assets contributed to the partnership. II. The amount of the partner's liabilities assumed by the other partners. III. The partner's share of other partners' liabilities assumed by the partnership.

Miller and Davis, partners in a consulting business, share profits and losses in the ratio of 3:2, respectively. Prior to recording the admission of Shaw as a new partner, Miller has a capital balance of $80,000, and Davis has a capital balance of $40,000. Required: For each of the following independent cases, prepare the journal entry that was made to record the admission of Shaw into the partnership. 1) Shaw purchased 20 percent of the respective capital balances of Miller and Davis, paying $20,000 cash directly to each of them. 2) Shaw invested $30,000 cash in the partnership for a 20 percent ownership interest. Total capital after recording his admission was $150,000. 3) Shaw invested $40,000 cash into the partnership for a 20 percent ownership interest. Total capital after recording his admission was $160,000. 4) Shaw invested $50,000 into the partnership for a 20 percent interest. Goodwill is to be recognized.

In the RST partnership, Ron's capital is $80,000, Stella's is $75,000, and Tiffany's is $50,000. They share income in a 3:2:1 ratio, respectively. Tiffany is retiring from the partnership. Each of the following questions is independent of the others. -Refer to the above information. Tiffany is paid $60,000, and no goodwill is recorded. What is the Ron's capital balance after Tiffany withdraws from the partnership?